Fed keeps interest rates unchanged - But Trump wants them cut to ease government spending
The United States Federal Reserve decided to keep its key interest rate unchanged while awaiting further information on the impact of tariffs and other potential disruptions on the economy.
Federal Reserve officials continue to expect two rate cuts this year, despite predictions that President Donald Trump's tariffs will increase inflation. In addition, they predict a slowdown in growth and a slight increase in unemployment.
The Fed cut inflation rates three times late last year but has not changed them since. Inflation has been gradually falling since January, but rates are expected to offset that progress in the coming months, according to Federal Reserve Chairman Jerome Powell.
The US federal agency expects the rise in inflation to be short-lived, but stressed that additional data is needed before adjusting or formulating medium- and long-term policies. “Rate increases this year are likely to push up prices and affect economic activity,” Powell said.
Moreover, employment has also slowed. Normally, such trends would prompt the Federal Reserve to lower the benchmark interest rate, which is currently around 4.3%.
Still, Powell said the economy remains in good shape and the Federal Reserve should consider the potential for prices to rise soon. “You could see maybe a little bit of a slowdown in the labor market, but nothing worrisome at this time,” he said.
Trump has cited modest inflation figures to argue that the Federal Reserve should lower borrowing costs and has repeatedly criticized Powell for his lack of action.
The US leader has previously argued that a rate cut would boost the economy. Currently, his attention has turned to the federal government's borrowing costs, which have risen sharply since the coronavirus pandemic, with interest payments exceeding an annual rate of $1 trillion.
The US president claims that if interest rates were lowered by two and a half percentage points, this would represent a reduction in government spending of over $800 billion.
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